How Convenient, Episode 14: Fully Charged

While convenience retailers continue to fuel up for a transformative year, energy drinks are quickly rising up as c-store MVP for boosting sales and driving trips.

In this week's episode of How Convenient, Melissa Jordan joins Greg Crow for a discussion on energy drink category growth, profiling the distinct energy drink customer segments and how c-store retailers can become integrated into these customers’ routines via valuable promotions and loyalty programs.

 

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Greg Crow: In this episode, we discuss an energy drink that grew 17% in sales in 2020. Welcome to How Convenient, a new podcast about the essential role convenience stores play in the busy lives of consumers. Our hope is to equip innovative C-store leaders as they seek to earn lasting shopper loyalty. In each weekly episode, we'll briefly share an update on C-store sales trends and what we're learning from billions of in-store purchase transactions.
Today's episode was recorded on March the 11th, 2021. I'm Greg Crow with Koupon. I'm thrilled that with me today is Melissa Jordan. Melissa, tell us about yourself.

Melissa Jordan: Hello Greg. Thank you so much for having me. I'm super excited to be here and I've been loving the content so far, so happy to be here.

So about me, I started with Koupon nine months ago, and I'm head of our client success team. Prior to Koupon, I managed digital marketing client success teams for businesses, large and small. If you name a vertical, I've likely managed their advertising from plumbers to dentists, from attorneys to some of the biggest names in CPG today. So I am energized for our conversation today.

Greg Crow: Awesome. So happy you're here. Melissa and I are new to podcasting so be patient with us as we get started and we would love your feedback. We'll let you know in a few minutes how you can share that with us.
So the flash for this week, for the week ending February 28th in store sales are down 2% versus 2020. Alcohol is up 14%, candy 2%, tobacco is flat, beverages down 1%, snacks down 3%, food down 6%. Total in-store trips are minus 15 and basket dollars are plus 15 and the hot product this week is TGI Friday's potato skins up 8% versus 2020, and cheddar and bacon is the hot flavor.

So Melissa, have you tried this product? Are you big on potato skins?

Melissa Jordan: I love some potato skins, but I have not tried this one specifically, so I'll have to go out and try again.

Greg Crow: All right. Very good. So this week we're going to dig into energy drinks. This has been a magical category for retailers in recent years in terms of driving trips and sales growth. And certainly the last 12 months have continued the trends. So, in 2020 energy drinks represent the largest category in packaged beverages on a dollars basis, eclipsing bottled soda for the second year. Energy drinks grew sales 6% compared to bottled soda at 3% and energy units grew 5%, which makes it one of the few major categories to win on the basis of both sales in units growth. So Melissa let's take a little bit. So if this is a fast paced category for retailers and important ones certainly, brands are continually introducing new options and consumers oftentimes are interested to try new products. So there's a wide range of positioning and flavor profiles in the category. How should retailers be thinking about energy drinks in 21?

Melissa Jordan: So energy drinks have a highly valuable and varied audience. Think about all these different consumer groups that they reach today. You've got your students, your athletes, your gamers, your professionals and of course the party crowd might've been in one of those or a few through the years but there are so many in here. So while there may be some crossover between groups, there are very distinct attributes for each of these groups. Some of our top brands have done well to reach these audiences by creating almost tailor made drinks to fit their unique lifestyles.

Now for a retailer, knowing how each consumer group interacts with their options in the store is key. So, the athlete may be interested in trying something new only if it means that they have healthier alternatives available. The gamer while enjoying a consistent flavor may be willing to try a new one if they're presented with one and the professional may have found what they want and they want to stick to it. So, knowing your customers is going to allow you to fill your store with the selection that works for your customer base. So use your data wisely.

Greg Crow: Yeah, that's such an important theme that we've talked about really throughout each of the episodes to your point, this is where that local insight and your loyalty program can definitely help you build an understanding of where consumer appetites are going. Fantastic.

So it's interesting to dig into how category trends were influenced by COVID. And we talked about certainly the category is doing well, but when we compare key metrics in 2020 over time we see a big shift post COVID as follows. So our units per store spikes early on nearly doubling and sales doubled in the second half of the year in terms of growth rates. So, Melissa, tell us a little bit, how can retailers take advantage of this trend, the wave energy drinks, stay growing and earn a lasting brand loyalty?

Melissa Jordan: This is a huge opportunity Greg. Energy drink consumers are usually on some sort of cadence with their consumption. So the key is to identify that cadence and become a part of it. Personally pre COVID, I had an energy drink after lunch. I stopped by my favorite location every single workday. COVID definitely shook things up for my routine and the routines of consumers but since then, we've either recreated or we've restarted our routines.
Now heads up, there's another routine shakeup coming soon as we start heading into the office again across the country, so keep that in mind. Now, regardless of timing, or routine, the big question is, “how can you be a part of your consumers routine?”
So first and foremost, awareness is step one. Promoting an enticing energy offer through your digital channels, and then tying this to maybe a loyalty program sign up will make them aware of what you have in your store, first and foremost.

Energy drinks are a huge trip driver, the redemption rates on these products are absolutely crazy, so this will work for you. So while these consumers visit their store on their way to, or from a workout, the office dropping the kids off at soccer practice, they'll pick up their energy drink, they'll see all the smiling faces at the register and look at all the other items that you have available so that next time, whenever they're moving from place to place, they'll think of you. Now, that's the easy part, getting them in the store the first time. But now that you have them signed up for loyalty, you can target them with an offer so that we can encourage them to visit you next time instead of going to the store down the street. You can do this by pairing an energy drink with another offer. So the top payer non-restricted categories for energy drinks are snacks, beverages, and candy.

Depending on the time of day that your consumers are visiting, find an offer to match the time slot. Across our panel, these consumers tend to purchase between 4 and 10:00 AM. This has only changed slightly since COVID hit the U S so it sounds like a good time to pair an energy drink with a delicious breakfast item. So I'll take the egg and cheese biscuit. Greg, what will you have?

Greg Crow: My goodness, if I'm being honest, a doughnut sounds fantastic.

Melissa Jordan: Okay, that sounds good.

Greg Crow: Yeah. 4 AM, isn't that a little surprising? That's quite early in the morning.

Melissa Jordan: It's a little early and you definitely need an energy drink at 4:00 AM to get things moving.

Greg Crow: I would need something, medical attention, probably. So you talked about promotions, I think that's a great way to transition. We did look at promotion trends in the category and had some interesting findings. Monster and Rockstar and Bang all increased promotion value in the market particularly post COVID while Red Bull, more or less held steady in terms of effective prices in the market. So consumers did see a modest price increase at a brand level in 2020 but once you factor in promotions and discounts there was actually a net decrease in effective price for nearly all brands except for Red Bull, which is obviously focused on that premium position in the market. So in terms of share contenders Monster and Red Bull continue own the category for sure, roughly 80% on a dollars basis.

Monster did grow at a slightly faster rate through Red Bull last year, but we talked about promotions so I'm sure some of that was at the expense of margin growth. There are some common patterns at the product level across brands. Melissa talks about the fact that there are different segments of consumers, all who have different preferences and interests over time. And so Monster Absolute Zero and Red Bull Zero grew at 10 and 11% respectively and brands are constantly introducing new flavor profiles. And so Red Bull Blue was up 17% and Watermelon had a big showing in the summertime. And then we continue to see some blurring across some of the traditional categories in beverage and Alcohol, Coke Energy Starbucks and Bang all brought new entries to the market in a hard sell search along with, I think, every other CPG manufacturer on the planet. So Melissa, let's talk about what are some of the trends that you see taking hold with consumers that retailers are watching closely?

Melissa Jordan: I've got two of them and I'll start with one that is very close to my heart. I love caffeine with my heart and soul, but like many consumers, I've just been looking for drinks that give me that same energy but in the absolute healthiest way possible. There's all these types of products popping up everywhere. You've got your vitamin patch drinks and you've got your drinks with adaptogens, they all promise healthier alternatives that still give you the same energetic pazazz that you'd get from your traditional drinks. Of our big three energy drink brands, Monster seems to be staying on top of just general health trends best with low carb, low calorie options, electrolyte infusions, they also have some green tea alternatives, which is great, but on the outskirts of this category, there are some, shall I say, interesting ideas around plant-based energy. As an example, certain types of mushrooms, crazy enough, have energy generating properties.

I can just hear our colleagues laughing at me right this second. Oh my goodness. I've heard it once, I'll hear it another time. So these ingredients though, are finding their ways into morning and afternoon routines of our consumers more and more so keep an eye out for that. The other trend I'll call attention to is around sizing. Brands are testing out different package sizes quite a bit recently, up to 12 or so individually packaged options in our panel, the most popular size is 16 ounce followed by 12 ounce and 8.4 ounces. There's also an increase in four-pack sales as well showing up in C-Store, interesting. Going back to our different consumer groups, some groups may be just interested in the more bang for their buck, no pun intended while others may just want the right amount of liquid to get the job done. So it'll be interesting to see where we net out with each of these brands as they differentiate themselves from the competition.

Greg Crow: It is just such an exciting category to watch because to your point, there is a lot of innovation that's happening in product level, there's a lot of promotion that manufacturers are putting into the marketplace to build and sustain brands and it is interesting. We've talked about, better for you as well as the trend around consumed some now and some later as being important in the channel. So fascinating. This has been fun, Melissa. Thanks for joining us.

Melissa Jordan: Okay.

Greg Crow: All right. So our next episode, we will talk about how independent C-Store retailers are winning in 2021. Thank you for listening to How Convenient we want to hear from you. You can reach us at Koupon.com. Don't forget to subscribe, rate us and give us a review. You can find more insights at blog.koupon.com.